We consider the economic implications of a compressed wage structure
which is exogenously determined by institutions. An important
feature of our analysis is that human capital is endogenous and can
be achieved either as formal education or as informal training within
firms after entering the labour market. While institutional wage compression
decreases the incentives of individuals to become educated, it
increases the incentives of firms to invest in training. As a result, the
net effects of wage compression on the aggregate human capital level
and GDP are ambiguous. Moreover, with wage compression, a skillbiased
technological change may cause wage inequality to decrease.
Keywords: Wage compression, training, education, inequality, institutions,
skill-biased technological change.
JEL: I21, J31, J5, O33.

Skill-Biased Technological Change in Denmark:
A Disaggregate Perspective*
In this paper, we provide an industry-level analysis of skill-biased technological change
(SBTC) in Denmark over the last two decades. The analysis shows that SBTC has varied
considerably across industries, and traditionally large Danish industries have experienced
relatively less SBTC. This may partly explain why wage inequality between skilled and less
skilled has risen less in Denmark than in other countries. We also find that SBTC has been
concentrated in already skill-intensive industries. This contains important information about
future labour requirements, as the relative importance of these industries must be expected
to grow, thereby reinforcing the shift in demand for skilled labour.
JEL Classification: J24, J31, L6
Keywords: skill-biased technological change, Danish industries